Canonical has explained why it has licensed H264. As it turns out, the license does not cover the distribution as a whole - since Ubuntu is entirely Free software, the license cannot be included. Canonical has licensed H264 so that it can offer it as an option to OEMs, just as it does with Flash, Fluendo, and some others. Since this is just an option for OEMs, it does not mean that every pre-installed Ubuntu system comes with the H264 license - it depends on whether or not your OEM decided to include it (good luck finding that out). And people actually promote this complicated spaghetti licensing situation.

This kind of licensing work is par for the course for hardware manufacturers - especially on the hardware side, but also on the software side. It's the same for Windows in fact, which is why you get HP shovel ware, which itself is licensed Blu-Ray codecs, and the like. I don't see the problem. Open source/patent free software must compete on merits, not licensing.